EUROFER Position Paper on the EU Steel Action Plan

Background

On 11 June 2013 the Commission adopted the “Action Plan for a competitive and sustainable steel industry in Europe”.

The Action Plan foresees over 40 actions by the Commission, invites the Member States to 12 actions, the European Investment Bank to one, and the industry to 4 actions (in the field of the social dimension).

The Action Plan tables a series of measures and recommendations in the field of energy and energy efficiency, climate policy, competition, trade, raw materials, research & innovation, and the social impact of the economic crisis and the restructuring of the sector. The Commission proposes to formally create a High-Level Group on steel entailing an annual high-level meeting. It will within 12 months (June 2014) assess how the implementation of the Action Plan has had an impact on the competitiveness of the steel industry.

About 20 actions concern only the steel industry. Other actions concern energy intensive industries or businesses in general. Several actions started already before the adoption of the action plan – such as the modernisation of the trade defence instruments and the revision of the waste shipment directive.

Meanwhile, the Commission has prepared a “Roadmap” for the implementation of the Action Plan. The Roadmap consists primarily of projected dates for the implementation of the measures. This roadmap has not yet been made public.

Mandate of the High Level Group

“The High Level expert Group will allow the Commission to consult the main stakeholders on a regular basis in order to constantly interact and receive feedback on the development and implementation of the EU steel policy. The mandate of the group will be: (1) To discuss and advise the Commission on any steel/related policy issues; (2) To follow up the implementation of the Steel Action Plan adopted by the Commission on 11 June 2013; (3) To promote the development of steel policies by the Member States.”

EUROFER welcomes the plan as a first step to create a new industrial policy framework to preserve a globally competitive European (steel) industry. It is a first step to solve today’s main economic, social, environmental and regulatory challenges for the sector and to maintain a strong steel workforce in Europe.

EUROFER in particular appreciates the efforts made in this respect by Commission Vice-President Tajani and Commissioner Andor, and the clear recognition by the Action Plan of the value that the European steel sector contributes to the economic and social base of the EU today and into the future.

However, unilateral EU measures just adopted, or in the pipeline, jeopardize all the good intentions of the Steel Action Plan. Those are unilateral measures by the EU such as backloading, cross sectoral reduction factor, structural measures in the ETS, more ambitious unilateral climate targets, draft guidelines downsizing exemptions for industry from decarbonisation surcharges, eco-design for furnaces, standards for sulphur in marine fuels, restricting stainless steel in medical devices by restrictions on Nickel (EP position), more bureaucratic hurdles in the revised Environmental Impact Assessment directive (EP position), the current approach to Substances of Very High Concern (SVHC) under REACH for the manufacturing of articles in the EU, etc.

Those regulatory measures have a much larger – negative – impact on industry than the positive role the actions foreseen in the Action Plan may play.

The CEPS study on EU regulatory cumulative costs for the steel industry proves that regulatory costs already today represent a huge share of the EBITDA of EU steelmakers of up to 30% in “normal good years” and 30% to over 100% in economic crisis years (e.g. 2009-2011).

Impact of cumulative regulatory costs on the EBITDA of the EU steel industry 2002-2011, in %

The Action Plan has now to be enacted, and some substantial gaps need to be filled to make it a success, in particular in the field of energy and climate policies. If so, the plan can play a significant role in improving the business environment for the steel industry and other industrial sectors in Europe, bringing back confidence to businesses and investment certainty. It is crucial that the suggested measures are now developed and implemented in a timely manner, and their effectiveness monitored.

EUROFER has developed recommendations for the 2030 energy and climate framework. In addition, the Alliance of Energy Intensive Industries has developed more detailed recommendations on measures to reduce industrial energy prices and costs. These recommendations should serve as a basis for the High Level Group when discussing securing the industry’s competitiveness and achieving the EU’s energy and climate objectives.

The European steel industry offers to contribute to a successful implementation of the Action Plan, including through continued restructuring to adapt to market realities and an effective European social dialogue.

State aid for the steel industry other than removing regulatory unilateral cost in the EU must be restricted exclusively to addressing the social and environmental consequences of restructuring and must not directly or indirectly lead to aid for maintaining business operations. This would hamper the current restructuring and lead to market distortions within the sector. The Commission guidelines on regional aid and the draft guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty are clear that such state aid will not be given to the steel sector. We must emphasis that the vast majority of the industry would not support access by the steel industry to rescue and restructuring aid or closure aid.

Regulatory measures which the steel industry needs as a matter of urgency now :

Climate policy

Clear measures by the EU that at least the most efficient steel installations in Europe have no direct or indirect costs resulting from unilateral decarbonisation measures by the EU as long as there is no international level playing field.

Reopen the ETS to set an achievable benchmark for hot metal and remove the cross-sectoral correction factor for sectors exposed to global competition

Certainty for post-2020 that at least the most efficient steel installations in Europe do not have any direct or indirect costs resulting from the scheme and will continue to have 100% of their needs in free allowances.

Energy policy

A clear commitment and measures by the EU and the Commission to reduce the gap in industrial energy prices and costs between the EU and its main competitors.

Full compensation of CO2 costs passed-through in industrial electricity prices in all EU member states.

Environmental and Energy Aid Guidelines that allow full offsetting of decarbonisation surcharges and other environmental and energy taxes.

Specific issues (the numbers refer to the respective chapters in the Action Plan)

3.1. The right regulatory framework

EUROFER supports the Commission’s initiatives for a cumulative cost assessment to assess the overall regulatory burden and to assess the impact of new Commission initiatives on the steel sector and other industrial sectors, including competitive proofing.

The findings of the cumulative cost assessment show a significant share of those costs in the EBITDA of EU steelmakers. The Commission should closely monitor the further development and propose measures to reduce the share of such costs in the EBITDA of industry.

However, the cumulative cost assessment is made for existing legislation only and it is retrospective (2001-2012). There should be an assessment/projections of existing legislation also for the future where possible, such as for the ETS where there is a clear intention to increase the carbon price to around 25 to 30 euros.

Proposals for legislation, notably in the field of climate and energy, must be accompanied by a transparent, comprehensive and accurate assessment of their impact on energy intensive industries using a sector-specific approach rather than focusing on the macro-level. The current modeling (such as PRIMES) does not lead to realistic scenarios.

EUROFER very much welcomes the Commission’s interest in promoting sustainability approaches within the materials purchasing dimension.

3.2. Boosting demand for steel

EUROFER supports the Commission proposals for actions to boost demand in key steel-using sectors such as automotive, mechanical engineering and construction, and asks the Commission to report as soon as possible on the effects of these initiatives.

EUROFER is of the opinion that major future oriented infrastructure projects for the modernization of the EU’s economy would be to the benefit of the EU steel industry and many other European industrial sectors. Such projects should be identified on national and EU level.

EUROFER recommends in this regard that Member States find a just balance between national austerity programmes and the need for public investment to stimulate demand in key industrial sectors.

3.3. A level Playing field at international level

EUROFER welcomes the proposals made in the Action Plan to shape a comprehensive trade strategy ensuring European steel producers have access to third country markets, to raw materials, to monitor scrap markets, to improve inspections and controls on waste shipment, and to consider the inclusion of coking coal in the list of Critical Raw Materials.

The Commission should identify and consider steel specific concerns prior to the negotiations for Free Trade Agreements and take these concerns fully into account before concluding such agreements.

EUROFER welcomes the Commission’s legislative proposal on the modernization of the EU trade defence instruments to swiftly update the basic Anti-Dumping and Anti-Subsidy Regulations, inter alia allowing the imposition of duties which better reflect the real injury caused to European industry (a deviation from the EU’s “lesser duty” rule).

EUROFER is of the opinion that EU climate and energy policies, as a basic principle, must not result in any additional direct and indirect costs for at least the most efficient installations in sectors which are exposed to global competition such as the steel industry. This is currently not given.

3.4.1. Energy policies to maintain competitiveness

EUROFER urges the Commission to present as soon as possible a set of concrete measures and proposals to effectively reduce the gap in industrial energy prices and costs between the EU and its main competitors, notably the US. Limiting measures just to strengthening market functioning and security of supply in the energy sector will not be sufficient to achieve this objective.

EUROFER stresses the need to stimulate the deployment of low-carbon energies in a truly cost-effective way and phasing out gradually subsidies so as to foster the rapid integration of these in the electricity market. In the meantime EU state aid guidelines must offer the possibility for fully off-setting the costs for globally competitive energy-intensive industries of overall electricity surcharges. Such off-setting must not been seen as state aid.

Exemptions are fundamental to steel as a sector. The current draft Environmental and Energy Aid Guidelines (EEAG) jeopardize the eligibility of the whole European steel industry for exemptions and reductions in funding of decarbonisation sources and capacity mechanisms. This is not justified with view to the exposure of the sector to global competition and the high level of energy costs in Europe. The draft is not aligned with the actions foreseen in the Steel Action Plan and the assignment of the heads of state to lower the gap in industrial energy cost between the EU and non-EU countries.

On the ETS, EUROFER recommends implementing as soon as possible in all Member States full compensation – at the level of best performance – of CO2 costs passed through in electricity prices.

The EU and MS should encourage and promote recovery of industrial process gases (waste gases) as these substitute primary fuels and thereby save a significant amount of CO2 otherwise emitted in the EU. The Commission should give a status for heat and electricity produced from waste gases similar to that of renewable energy.

3.4.2. Climate policies to maintain competitiveness

EUROFER stresses again that, as a fundamental principle of EU climate policies, the objectives for industry under the EU emissions trading system must be sector-specific, technology-based and economically viable.

The benchmarks set by the Commission need to be technically achievable taking account of all the CO2 stemming from the steelmaking process.

EUROFER is concerned about the impact the recent Commission Decision on Member States’ national implementation measures (NIMs) for the third emissions trading period will have on industry by the application of the cross-sectoral correction factor, which demonstrates that even the most efficient installations in Europe will have additional costs resulting from the current system.

EUROFER is also concerned about intervention in the carbon market such as backloading and structural measures to artificially increase the carbon price.

EUROFER urges the Commission to present as soon as possible a legislative proposal for the revision of the EU emissions trading directive providing technically and economically feasible targets for each sector securing that no direct or indirect costs will result from the system for at least the most efficient installations.

The current climate change approach must be reviewed in this sense.

3.4.3. Resource policies to boost competitiveness

EUROFER welcomes the proposal to consider eco-design requirements for recyclability and dismantling in order to ensure easier separation of steel from relevant products.

The application of the Life Cycle Approach in EU policies is essential to exploit the full potential of steel as endlessly recyclable and a permanent material.

EUROFER calls on the Commission to improve market access for steel by-products such as slags as these substitute primary materials and save CO2 emissions in downstream sectors, such as the cement industry;

3.5. Innovation

EUROFER welcomes the actions envisaged in the field of innovation. We consider a high level of industrial and public funding for R&D, pilot and demonstration projects in the steel industry as essential for a competitive, carbon-lean and energy efficient European economy and welcomes the Commission’s initiatives in this respect, such as under the framework of Horizon 2020, SPIRE (Sustainable Process Industry through Resource and Energy Efficiency) and the proposal to earmark revenues from the EU emissions trading system to reduce CO2 emissions at source.

3.6. The social dimension: restructuring and skill needs

The proposed actions on the social dimension such as regards skills, life-long learning and the employment of young people in the steel industry are crucial for the steel workforce.

The implementation of the Action Plan should not only address the social dimension in the midterm and longterm but also, as one of its priorities, focus on the short-term impact of the economic crisis on the sector’s workforce;

EUROFER asks the Commission to immediately and fully deploy EU funds to mitigate the impact of the economic crisis on the steel workforce. The Commission should make available a contact point for the coordination of this with the steel industry. The European steel industry commits to also provide a coordinator in this respect and asks the same from the member states and the national unions.

EUROFER welcomes the invitation by the Commission to continue its activities in the field of the social dimension. In its Action Plan the Commission “invites industry to

- play an active role to remedy the skills gaps and shortages,

- continue the necessary adaptation of the industry in accordance with best practices on anticipation of change and restructuring, including through social dialogue and proper involvement of regional stakeholders,

- examine restructuring needs and possible capacity adjustments in view of the future demand of key sectors, taking into account the need to deal differently with structural and cyclical trends,

- co-operate with other stakeholders, especially national and regional authorities in ensuring that cyclical overcapacity is dealt with through publicly supported temporary measures preserving employment in the long run.”

Skills:

The European steel industry is committed to further enhance its role in the field of skills gaps and shortages and anticipating future requirements. We propose, as a starting point, that the Social Dialogue Committee on steel continues to give special attention to these issues. The Social Dialogue has been working successfully since its establishment in 2006, fostering common understanding about the key challenges and perspectives for companies and workers in the European steel industry. The so-called “feasibility study on EU Steel Skills Council” on the one hand and the development of a training module, the “Greening Technical VET”, are two examples of the activities. The feasibility study however came to the conclusion that a separate European Skills Council is not needed. This view is supported by EUROFER

Flexibility:

The recession period has highlighted the full benefits of flexibility at company level. Commission, Member States and Trade Unions should facilitate and support dialogue between social partners to implement all relevant opportunities of introducing labour flexibility schemes, with regard notably to cyclical adjustment.

Even if industry could co-operate with other stakeholders, especially national and regional authorities in ensuring that cyclical overcapacity is dealt with through temporary measures intended to preserving employment in the long run, no measure should interfere with company responsibility and its decision making process. Restructuring has to remain the responsibility of individual companies.

European-funds:

The European steel industry will investigate the best use of funding to mitigate the social impact (on employees) of restructuring and capacity adjustments. In this respect, the recent proposal of the European Parliament to extent the scope of the European Globalisation Fund to mitigate the impact of the economic crisis, should be supported.

The use of funding to mitigate the social impact of restructuring and capacity adjustment should not create an unfair competition situation within the European steel industry. The companies are best placed to anticipate market development affecting them including how to assess future skills and employment needs, and to develop an effective social dialogue at the relevant level. The industry does not believe therefore that an interservice task force would be of any additional value.